NZ dollar rises, business confidence next

• New Zealand dollar posts strong gains
• New Zealand Business Confidence expected to remain positive

The New Zealand dollar has started the week in positive territory. In the North American session, NZD/USD is trading at 0.5828 up 0.53%.

It has been a miserable October for the New Zealand dollar, which has fallen 2.78%. Last week NZD/USD dropped as low as 0.5772, its lowest level in a year. The New Zealand dollar isn’t getting any support from the Reserve Bank of New Zealand, which held rates for a fifth consecutive time in October. The central bank won’t come out and state that interest rates have peaked, but it’s clear that the RBNZ won’t be increasing rates unless the economy suddenly surges and sends inflation higher.

New Zealand releases ANZ Business Confidence on Tuesday. The indicator climbed to 1.5 in September, ending a nasty streak of declines that started back in May 2021. The market consensus for October stands at 1.0, which would point to weak business confidence.

The markets will have plenty more to digest on Tuesday, with the release of the third-quarter employment report and the RBNZ financial stability report, followed by a press conference with Governor Orr.

The Federal Reserve has sounded hawkish about inflation and signaled that rates will remain “higher for longer”. The battle against inflation isn’t over and we received a reminder to that effect on Friday from the Core PCE Price Index, which is the Fed’s preferred inflation indicator. The index rose 0.3% in September from 0.1% in August and was the highest level in four months.

Personal Spending jumped 0.7% m/m in September, up from 0.4% in August and higher than the market consensus of 0.5%. Personal Income dropped from 0.4% to 0.3%, shy of the market consensus of 0.4%. Consumer spending remains robust and the Fed will be on guard, although it is unlikely to raise rates before the end of the year.

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NZD/USD Technical

• NZD/USD is testing resistance at 0.5819. The next resistance line is 0.5864
• There is support at 0.5765 and 0.5720

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